The countdown to Budget has begun and Smt. Nirmala Sitharaman, the first lady Finance Minister of India, will present her maiden Budget 2019 on Friday, July 5, 2019. It has given further fillip to the curiosity of the Indians to know what sort of budget she has in store for us.
It is expected that FM will announce a number of big decisions considering the focus of Interim budget on small taxpayers. The Government could throw several surprises to please the biggest drivers of economy which are middle class citizens and salaries class taxpayers. Their expectations from Full Budget 2019 are elaborated in following paragraphs.
In order to keep, taxpayers having total income of Rs. 5,00,000, out of tax ambit, the Finance Act, 2019 has increased the tax rebate available under section 87A from Rs. 2,500 to Rs. 12,500. The rebate of Rs. 12,500 shall be available to those resident individuals whose total income does not exceed Rs. 5,00,000 during the Previous Year 2019-20.
However, if taxable income of taxpayer marginally exceeds the limit of Rs. 5 lakhs, the tax liability increases considerably. As the slab rates have not been tinkered with. It is expected that Govt. should consider introducing the marginal relief for the individual taxpayers who are earning slightly more than Rs. 5 lakhs.
Alternatively, in order to introduce marginal relief, the Govt. may revise the slab of income-tax rates. Currently, there are three income-tax rates, i.e., 5%, 20% & 30%. We may expect that Govt. might bring a new 10% income tax rates for small individual taxpayers. Further, the basic exemption limit might witness a change in upcoming budget. Since last 5 financial years, basic exemption limit has remained static, i.e. Rs. 2.50 Lakhs. Increase in maximum exemption limit will not only benefit the taxpayers but also the department to reduce its compliance cost.
Interest on housing loan
A taxpayer gets deduction with respect to interest on housing loan in a year only upto the extent of Rs. 2,00,000 and any excess interest paid can be carried forward for deduction in subsequent years. Interim budget 2019 brought a sign of relief to many assessees especially salaried class people working in cities away from their homes, by allowing them to declare two house property as self-occupied for the purpose of calculating income from house property.
However, the deduction with respect to interest on borrowed capital with respect to both the houses remains unchanged, i.e., Rs. 2,00,000. It is expected that the Govt. might give higher deduction for interest on housing loan. This will help Govt. to boost the housing sector as well.
There are some medical expenses which are neither reimbursed by insurance company nor deductible under Income-tax Act, 1961. Earlier medical expenses up to 15,000 were entitle for deduction under the head salary. Even this deduction has been withdrawn by finance act 2018. Thus it expected a new section will be introduced in order to provide deduction of medical reimbursement.
Investments is one of the important tax saving instrument for the small taxpayers. The deduction towards investments is allowed under section 80C of the Income-tax Act, 1961. Assessees not only claim deduction for investments made under this section but also claim deduction with respect to a few expenses incurred during the year such as tuition fees paid for the children or payment for principal amount of the loan etc.
The section 80C allows deduction for up to Rs. 1,50,000. It is important to increase the scope for the taxpayers to make further investments. It is expected the Govt. might increase the limit of Rs. 1,50,000 to Rs. 2,00,00 in upcoming budget.
Deduction for interest on Savings bank deposits
Interest received from banks with respect to savings bank deposits is taxable in the hands of account holder. However, deduction is allowed with respect to such receipts to the extent of Rs. 10,000. Limit of Rs. 10,000 was introduced by finance Act 2012, with the increase in inflation rate and introduction of Section 80TTB, this limit needs to be revised so as to provide relief to small taxpayers.